Olympic tycoon's golden ticket: exclusive rights to sell the Games

NEW YORK (Reuters) - Like thousands of Olympics fans worldwide, Matthew Rose started planning his family trip to the Rio Games many months in advance.

The Atlanta-based sports trainer knew it wouldn't be cheap, but in January he grew concerned when he looked into buying the event tickets.

CoSport, a firm that holds exclusive rights to sell Games access to the U.S. public, was pricing its tickets at an old exchange rate that was about 40 percent less favorable than the market rate and also adding 20 percent handling fees.

In addition, almost none of the tickets Rose wanted, for popular events like swimming and beach volleyball, were available at any price.

It wasn't that CoSport lacked inventory. On its website, it was still offering many seats at marquee Games events to certain customers: those ready to buy its "hospitality packages".

At prices as steep as $3,000 a day per guest, the packages combined tickets with hotel rooms, or access to lounges before events. Airfares and most meals weren't included.

In CoSport, Rose had encountered an entrenched Olympics gatekeeper, a firm with exclusive rights from the U.S. Olympic Committee to distribute tickets for eight straight summer or winter Games, including Rio de Janeiro this month and Tokyo in 2020.

Under global Olympics rules, resellers in each country must offer tickets at affordable prices, can set aside only a "small" portion of tickets for packages and are limited to 20 percent ticket mark-up fees. On hospitality packages, though, services such as hotel accommodation have no specific cap on mark-ups.

An official price list for Rio, released by organizers in 2015, showed that the average ticket would cost around $36.

CoSport said it abides by the rules on ticket sales, only applying the allowed mark-up, and has scored consistently high marks in customer satisfaction surveys.

The company said it makes big up-front investments ahead of each Games, not only for the exclusive rights, the tickets themselves and hotel rooms, but also for training host-city staff. The price structure it used for hospitality packages was approved by Games organizers, CoSport added.

CoSport paid Rio organizers for tickets in U.S. dollars at an exchange rate set in 2014, which is passed on to customers.

U.S. Olympic committee spokesman Patrick Sandusky said the committee approves CoSport's ticket pricing. He did not respond to questions about package pricing or how many Games tickets were allowed to be sold in bundled packages.

He said negotiations with CoSport and contract terms were confidential. The committee works with CoSport because the firm has a long history of delivering "high-quality hospitality Olympic experiences", Sandusky added.

CoSport spokesman Michael Kontos said customers would prefer a simpler system but Olympics ticketing is inherently complex, given that it relies on dozens of national Olympic committees around the world to appoint their own sales agents.

"Nothing about organizing the Games is as simple as organizing a concert or football game," he said.

OLYMPIC TIES

Still, some fans and experts complain that CoSport's prices and packages with bundled services make it prohibitively expensive for them to attend the Games.

The U.S. Olympic committee typically does not hold a competitive bidding tender before awarding ticketing rights to a reseller, according to a former U.S. Olympic official who was involved in the process.

The committee declined to say how it selects an exclusive ticket reseller. Sandusky said it values its long-term relationship with CoSport but is always open to new business partners.

The lack of a competitive tender, and of a clear rule on how many tickets can be bundled into expensive packages, raise questions about the transparency and fairness of the Games ticketing system, said sport ticketing expert James Reese, a professor at Drexel University in Philadelphia.

"It looks like a good old boys' network," said Reese.

CoSport's Olympic ticketing and hospitality business reaches back decades and extends well beyond the United States. For the Rio Games, it was also the authorized reseller for fans in the UK, Australia, Canada, Russia, Bulgaria, Norway and Sweden.

An émigré from the former Yugoslavia to the United States, Dizdarevic broke into the market by arranging hospitality for Americans at the 1984 winter Games in Sarajevo. Since then, his Olympics business has grown steadily.

Around eight years ago, he made a multi-million-dollar donation to the U.S. Olympic committee, the largest it had ever received from an individual donor, a former committee official told Reuters, requesting anonymity.

U.S. Olympic committee spokesman Patrick Sandusky confirmed Dizdarevic was a donor and said this played no role in the committee's decisions to award his firms more business.

"His personal philanthropy is in no way connected to the business relationship...," Sandusky said.

Neither CoSport nor the U.S. committee disclose the value or terms of the ticketing deal, but the former U.S. Olympic official said CoSport pays fees to the committee which also takes a cut of the sales revenues.

The worldwide sale of tickets for a summer Games have sometimes accounted for more than $300 million, according to IOC data. This excludes any bundled services such as hotel rooms.

Another company owned by Dizdarevic, Jet Set Sports, provides luxury hospitality to Games sponsors, VIPs and members of various Olympics committees worldwide.

At each Games, CoSport and Jet Set sell hundreds of thousands of tickets and can book thousands of hotel rooms years in advance, according to the former U.S. Olympics official.

PRICEY PACKAGES

In recent months, CoSport's website offered a five-day "flex" package for the Rio Games in mid-August at a cost of $15,832 for one person. The package gave customers a choice of attending six events out of 69 on offer, and included accommodation at a three-star hotel.

Reuters checked online with CoSport to see if the company was also offering the same tickets on a standalone basis. Only nine out of the sixty-nine tickets were available for purchase outside of a package.

CoSport did not address a specific question posed by Reuters about the package.

Cordelia Price, an avid U.S. gymnastics fan, said she paid nearly $13,600 for a five-day, two-person package from CoSport, which included eight tickets and a three-star hotel. Airfare and ground transport were not included. Price said the package was the "only option" she found to attend the gymnastics events she wanted to see.

As of late July, other travel booking websites were offering three-star hotel rooms in Rio for $300 a night during the Games.

"The IOC (International Olympic Committee) needs to work on a process that makes the Games affordable to the average person instead of contracting with someone who sells packages at ridiculously exorbitant prices," Price said.

Another Games fan, Texas-based Leigh Batten, said she and some friends bought many of the standalone tickets they wanted via CoSport, though only after making multiple applications for tickets over some months. She was satisfied with the experience and her group managed to book accommodation in Rio separately.

Kontos, the spokesman for CoSport and Jet Set, said the two firms had served more than 1.2 million Olympics fans over 30 years. He declined to say what percentage of ticket sales were tied to packages.

Dizdarevic's companies highlight their long-standing relationship with Olympic officials on their web sites. In at least one instance, these ties have drawn legal scrutiny.

In the mid-1990s, when Salt Lake City was lobbying for the winter Games of 2002, Dizdarevic gave bid committee officials $131,000 in payments which U.S. prosecutors later alleged were used to influence IOC members to ensure the city won the Games.

In 2000, after Salt Lake City was named as host, prosecutors brought a criminal case against two local bid committee officials accused of corruption and called Dizdarevic as a witness.

Dizdarevic, who received immunity from prosecution, testified about the payments he had made, calling them a business expense. He said he also felt a duty as a naturalized American to help the Salt Lake City bid.

The two officials were later cleared but several IOC members quit over the scandal.

Jet Set went on to become official hospitality provider at Salt Lake City, and Dizdarevic made a profit of at least $7 million there.

At a typical summer Games, more than 70 percent of tickets are held for local fans and sold by the local organizing committee. Foreign fans rely on resellers, at least until unsold local tickets are opened up to foreigners, as Rio did on June 1.

Just days before the Rio opening ceremony, 1.3 million tickets remained unsold, about a fifth of the total.

For Matthew Rose in Atlanta, the vexing search for tickets finally took an auspicious turn in May.

Rose's mother is Brazilian and he has dual nationality. With help from family, he was able to buy 49 games tickets locally for around $3,500 and got most of the events he wanted.

(This refiled version of the story corrects typo in paragraph eight, no other changes to text).